U.S. Treasury to auction off $58 billion of 3 year notes at the top of the hour

The start of a key auction cycle this week.

The US treasury will auction off $58 billion of three year notes at the top of the hour. The auction will kickoff the refunding this week that continues tomorrow with the sale of $41 billion of 10 year notes and the sale of $27 billion of 30 year bonds on Thursday.
The recent six month averages of some of the auction components:
  • Bid to cover, 2.45X
  • Dealers, 31.1%
  • Directs, (indicative of domestic demand) 17.4%
  • Indirect (indicative of foreign demand) 51.4%
The last auction came in a high yield of 0.426%, with a tail of 0.2 basis point.

Major European indices close higher

Euro Stoxx index closes at another record high

Themajor European indices are all closing hiigher on the day. The France’s CAC moves closer to its 2000 all-time high. The Euro Stoxx index closes at a another record high.
The closing levels are showing:
  • German DAX, +0.16%
  • France’s CAC, +0.1%
  • UK’s FTSE 100, +0.4%
  • Spain’s Ibex, +0.4%
  • Italy’s FTSE MIB, +0.25%
  • Euro Stoxx 50, +0.31%
In other markets as European/London traders look to exit shows:
  • Spot gold, plus $1.87 or 0.12% at $1731.68.
  • Spot silver down one cent or -0.05% at $23.43
  • WTI crude oil futures are up $1.55 or 2.31% at $68.38
  • Bitcoin is down $1100 and $45,175

US Senate passes $1.2 trillion infrastructure bill in 69-30 vote

Voting concludes on infrastructure

The long road to passing a bipartisan infrastructure bill has cleared its first major hurdle. It will now head to the House but there’s an open question on the timeline. Nancy Pelosi has suggested that she wants to match the timeline of this bill with the reconciliation bill that will get rolling later today.
The margin of 69-30 is great news for bipartisanship with nearly 20 Republicans supporting the bill.

UK records most covid deaths since February

Weekly reporting quirks make it sound worse than it is

The UK reported 146 covid deaths today, which is the highest since February but it’s not as bad as it seems. There’s a weekly bump in Tuesday reporting, likely due to weekend effects. The prior two days were 37 and 39 deaths. Comparing to last Tuesday’s number of 138 gives a more accurate picture of the trend. On a seven-day average, it’s at 88. Morever, there doesn’t appear to be any sharp turn higher ongoing.
Weekly reporting quirks make it sound worse than it is
In terms of cases, the V-shaped recovery has stalled around 25K daily cases. They were at 23,510 today compared to 21,466 a week ago.
The best news is that the UK crossed 75% vaccinated today.
The market is watching cases in the US for signs of a v-shaped peak. What’s more-worrisome about the US though is that hospitalizations have tracked much higher than in the UK and in a few states are at pandemic highs.
I worry that high cases may stifle the school year in the US and elsewhere this year. That would be a headwind to economic growth.
In terms of FX, cable has been bouncing around in the last hour in a 30 pip round trip. That looks to be fixing flows rather than covid or anything else fundamental.

Powell reportedly faces growing resistance for second term as Fed chair

It will boil down to either Powell or Brainard for top dog at the Fed

The latest story by the WSJ says that while Biden’s economic team is generally supportive of Powell sticking around for a second term as Fed chair, some Democrats are pushing for a central banker more in sync with the party’s priorities.
The report adds that there are members at the camp, including prominent Democrat Elizabeth Warren, who are displeased with Powell’s approach to financial regulation and may prefer a change at the helm, citing people familiar with the matter.
For some context, Powell’s term is due to expire in February next year. As such, this will be more of a hot topic in the months ahead, so be sure to keep an eye on the reports and how things are progressing.

AUD/USD still largely caught in a consolidative range for the time being

AUD/USD trims losses to flat levels on the day but price action since mid-July suggests a more consolidative range for the pair

The aussie traded down to 0.7317 against the dollar in Asia Pacific trading but has pared the decline to 0.7333 now, back to flat levels on the day.
There isn’t much happening leading to the slight nudge higher as the general mood among major currencies and the dollar stays more subdued, with little change observed. Meanwhile, risk remains tentative as US futures are still down 0.1%.
That’s just suggestive of some push and pull with the aussie dragged a little lower earlier by some flows on the data front and Australia’s virus situation.
AUD/USD D1 10-08
Going back to AUD/USD price action, the pair continues to be largely trapped between 0.7300 and 0.7400 as evident on the daily chart after having seen a series of lower highs and lower lows dragging the pair to the current range since June trading.
For now, there is more of a defined area that price action is settling in and there needs to be a break on either side to suggest any fresh directional movement in the pair.
Adding to that from a technical perspective, a ‘death cross’ looms on the daily chart with the 100-day moving average (red line) looking to cross over the 200-day moving average (blue line) in the pair for the first time since August last year.
That will be a bit of a blow to buyers, especially if the dollar continues to keep more resilient and we see a push below 0.7300 and the July low of 0.7289.
Such a play will leave little in the way of a push towards 0.7000 next, especially so if the virus situation in Australia continues to dampen the RBA/economic outlook.
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